Is Halving The Cost And Time Too Much To Ask?

<B> Is Halving The Cost And Time Too Much To Ask?</B>

By Dan Geller

<i>Dan Geller, formerly national sales director for ITT Sheraton, is now president of San Francisco-based e-commerce consultancy Wizbizweb at wizbizweb.com.</i>

What would you do if your CFO just walked into your office and asked you that question? Most people would interpret this as a need to reduce the cost of travel itself, but that is not the question nor is it the intent. What your CFO

wants to know is whether you can make the administration and distribution part of your T&E more cost effective--in other words, establish faster processes that cost less to produce the same results.

CFOs analyze T&E expenses, by breaking them down into direct cost and indirect cost. Direct cost is the actual negotiated price that you are paying for the travel product, such as the airline flight, the hotel room, etc. All the other costs associated with the trip, such as transaction or management fees to travel agencies, the time it takes to make reservations, the entire RFP process, etc., are indirect costs, and currently amount to about 30 percent of your total T&E expense.

Most of your direct T&E expense is necessary to conduct business. But, you definitely can reduce the total T&E expense of your company without reducing travel or downgrading travel vendors by impacting the indirect cost portion of your total T&E. The way to do that is by implementing e-commerce strategies for your travel operation.

Electronic commerce is a process of transforming current travel management functions into more cost-efficient practices by using emerging technologies. When we look at travel management, it consists of three main functions: purchasing, utilizing and analyzing. Each of these functions has a corresponding e-commerce improvement that will make the function more cost-effective.

The most important elements of the purchasing function are centralization and integration. These elements can be achieved by using the standard hotel RFP (endorsed by NBTA & ACTE) in a Web-based central depository. Each hotel will post completed information on the site, and will update it regularly. You will be able to retrieve the RFP at any time, and you will be able to retrieve only the information fields that are of interest to you.

There are two main e-commerce components to utilization. First is the process of linking your Web-based booking engine directly to the vendor's central reservation system, thus bypassing any middleman who does not add value to your process and yet adds to your indirect cost.

Secondly, the smart card application with preferred vendors will cut the time and cost for travelers to complete such tasks as making travel arrangements, checking in/out at airlines and hotels, renting a car and preparing an expense account at the end of the trip.

The main e-commerce component of the analyzing stage is knowledge management, which is an infrastructure for transforming collective ideas and insight into a refined and usable tool that is used to improve your business. Knowledge management consists of involving as many people as possible in the process. The application used to communicate and collect the information must be interactive and accessible to all involved any time from anywhere. This process should encourage all ideas, even those that might seem "off the wall."

The system also must be integrated to collect and process all information. Finally, participation should be encouraged and rewarded by establishing an incentive structure that will recognize participation and contribution.

Your tangible e-commerce benefits will include: reducing the cost of the administrative and distribution portion of your T&E, currently at an average of 30 percent; increasing compliance to your travel program by providing your travelers with an easy, simple and timeless booking and communication vehicle; increasing your importance and contribution to your company by giving you the tools to positively impact total T&E spending, currently at an average of 2.5 percent; and strengthening the working relations that you have with your preferred suppliers by giving them an opportunity to participate in the cost-saving benefits of e-commerce.

You can start benefiting from e-commerce by thinking of it as a toolbox filled with different tools. The decision on which tool to use and to what extent depends on the specific needs of your travel operation.

You also do not have to implement all of the components of electronic commerce simultaneously. For example, you can start implementing the communication element (your travel Website), and after it is completed, you can move on to establish the trading element. Each of the three main elements of e-commerce can stand on its own, and provide you with the desired results.

So, instead of waiting for your CFO to bring up this issue, take the initiative, and make a substantial cost-savings contribution to your company.